The Government has resisted demands from Labour MPs and unions for a windfall tax on energy companies, and Mr Brown said it was better to focus on longer-term measures.

Rising fuel bills have become a major political issue, with the average family bill up from £676 a year in 2005 to an expected £1,406 in 2009. More than 10% of people will be in debt to their energy supplier by the end of the year, according to the National Housing Federation.

Under Mr Brown’s plans pensioners and poorer households will get free cavity wall and loft insulation, and all households will be offered a 50% discount on the work.

Half a million customers will have their bills frozen, and cold weather payments to the most vulnerable will go up from £8.50 a week to £25 if temperatures drop consistently below freezing this winter.

He insisted the measures would have an immediate impact, despite claims that loft insulation work can take as long as four weeks to complete.

Mr Brown said households could save an average of £300 a year as a result of the new policies, which needs the approval of MPs when the Commons returns next month. The £910m cost is being raised from the energy companies themselves, who will carry out the insulation work.

But there were fears the costs would be passed on to consumers in the form of higher bills. David Porter, chief executive of the Association of Electricity Producers, said “the bill to some extent always ends up with the customer”.

Speaking in Downing Street, Mr Brown said: “Instead of a windfall tax, this is the better way of moving forward. We want to keep energy bills as low as possible and I do not expect the £910m that we raise to be passed on to the consumer by the energy companies. I think that’s a very important point to make.”

Mr Brown has pinned his hopes of political survival on an autumn relaunch, centred on the idea of “fairness” to voters struggling with the economic downturn.

But, as with last week’s housing measures, the Prime Minister was criticised yesterday for being too timid. Gas and electricity watchdog energywatch criticised the Government’s response to the growing fuel poverty crisis as being “too little too late”.

Help the Aged echoed the theme, saying: “Individual changes which have been flagged by the Prime Minister are sensible and move in the right direction, but they are too little, too modest and will take too long to address the urgent plight of many pensioners today.”

Trade unions, the leading advocates of a windfall tax, accused Mr Brown of “missing the point”. Derek Simpson, joint general secretary of Unite, said: “It is now that people need help with the bills that are dropping on their floors. The energy companies are laughing all the way to the bank while hard-working families are going to really struggle this winter.”

The GMB union has submitted a motion to Labour’s annual conference in Manchester later this month calling on the Government to restore the power of regulator Ofgem to fix gas and electricity prices. Unions are likely to resurrect the idea of a windfall tax at the conference. Tony Woodley of Unite said his union would “fight on for fuel justice” at the conference.

A further headache for Mr Brown may come when his measures are put forward for parliamentary approval. With more than 100 MPs having signed a petition calling for a windfall tax, a rebel amendment could force him into a change of policy.

Labour MP for Rhondda Chris Bryant backed Mr Brown, saying: “I know from a lot of my constituents that they have real worries about paying energy bills this winter, and some of them still have very inefficient insulation in their homes.

“This will go a long way to cutting those bills, not just this year but every year, making it easier for the elderly and those who rely on their heating the most.

“This is an important move, the measures are sensible, will help those in need, and show that this Government will work hard to make people’s lives better.”

But Mark Williams, the Liberal Democrat MP for Ceredigion, said: “The whole package is not going to make much of a difference for the many families who are seeing their energy bills skyrocket.

“There is no doubt that helping people to make their homes more energy efficient will have long-term benefits, but as many people this winter will be struggling just to meet their basic energy needs, it’s a bit like promising a drowning man free swimming lessons.”

A publicity campaign is being launched today to make households aware of the changes. The government says its aim is to insulate every home in Britain by 2020 – and energy companies, councils and voluntary organisations will be making door-to-door visits in deprived areas to promote the scheme.

Cold weather payments are made if the temperature drops below zero on seven successive days. Those who qualify are pensioners, disabled people and families with a child under five or a disabled child receiving income support.

The separate Winter Fuel Allowance pays £250 to any household with someone over 60 and £400 to households with someone over 80.

Cold weather payments to go up from £8.50 a week to £25 a week for pensioners, disabled people and unemployed families with children under five – if temperatures drop below zero for seven days in a row.

New Government target of insulating every home in Britain by 2020.

£910m cost, spread over three years, to be met by the energy companies – but no windfall tax on their profits.

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